Transparency International Pakistan and Pakistan Railways (PR), it appears, are engaged in a battle of endurance over the purchase of 150 locomotives, which may result in a loss of Rs 40 billion to the exchequer.
Allegations, explanations and clarifications galore are being exchanged between the two on daily basis, quoting various Public Procurement Regulatory Authority (PPRA) Rules to justify their actions.
In his latest letter, sent on May 14, to the Secretary/Chairman of Pakistan Railways, Transparency International Pakistan Chairman Syed Adil Gilani has advised him that it is in his own interest "to comply with PPRA Rules 2004 to avoid mis-procurement allegations, in this and all tenders."
The PR had taken refuge behind following rules which Transparency International Pakistan explained as:
-- PPRA Rule 42 is not applicable in this procurement. Rule 2(f) is applicable in this particular situation as it pertains to collusive practices among bidders (prior to or after bid submission) designed to establish bid prices at artificial, non-competitive levels and to deprive the procuring agencies of the benefits of free and open competition. Rule 10 is applicable in this and each and every procurement by all procuring agencies.
-- Under Rule No 10, PR cannot name one country only as supplier, nor PR can specify only two brand names GE and GM prime movers without writing or "equivalent", as even in US at least four other reputable manufacturers exist, viz, American Locomotive Company (ALCO), Baldwin-Lima Locomotive Works (BLW), Fairbanks-Morse (FM) and Green Goats.
-- Rule 42 (d) is not applicable in this procurement as it is a Rs 40 billion procurement of 150 locomotives, which are manufactured by hundreds of firms all over the world. PR understanding of Rule 42 is wrong. PR has not been tied up for ever with GE. With this logice, PIA shall always buy Boeing aircraft, under replacement program.
-- Each and every manufacturer of locomotives in such huge quantity will arrange loan. Even Exim Bank loans, which are never tied loans. Had it been a grant or state loan, then only donor agencies' conditions would have prevailed over PPRA Rules. According to Rule 11, PR should have obtained government approval prior to initiating the tendering process.
While PR has clarified that Ministry of Railways has never favoured any single contractor or supplier but has requested all suppliers/manufacturers in the US for participation in the bid, Transparency International Pakistan insists that since PR is asking for foreign funding from bidders in this procurement and when payment in foreign currency is made and sovereign guarantee is required for foreign exchange loan, approval of Ministry of Finance and Government of Pakistan is mandatory requirement, prior to processing the procurement.
In reply to Transparency International Pakistan's letter to the Chairman, PR sent on May 12, PR had clarified that the specifications are not confined to any one particular brand name, model number, or catalogue number, etc, in view of the replacement program of old US origin locomotives and availability of US Exim Bank tied loan, the tender has been floated for all US suppliers and that, too, is subject to the approval of loan by the Government of Pakistan. Since monitoring the source country does not mean a single supplier, PPRA Rule No 10, therefore, is not valid, PR said.
The cost of tender document shown as Rs 500,000 has been described as a typographical error which was meant to be Rs 5,000 only and necessary amendment is being issued, it said.
Other points clarified by PR are as follows:
-- It is on the advice of the Planning Commission that the locomotives are being procured on the non-development side and not development side only. In an earlier case, the Planning Commission had advised that procurement of rolling stock and locomotives is a non-development activity which should not be routed through CDWP and Ecnec by way of submitting PC-1. Therefore, it is wrong to say that the Planning Commission had been bypassed.
- The approval mechanism for such procurement is being strictly followed. The process has been initiated with the approval of the competent authority in the Ministry of Railways. The tender will help Railways in getting competitive prices, and final proposal will contain the realistic price to be approved by the ECC. In any case, the tender is subject to the approval of loan by the Government of Pakistan, as mentioned in the tender.
-- Regarding the need for two envelope bidding process, PR clarified that in an earlier case PPRA had advised the Ministry of Railways to use two-envelope system under section 36(d) of PPRA Rules in such procurements. That is exactly what the Ministry did.
Gilani, reacting to PR reply, quickly replied the same day ie May 12 as follows:
-- PR has accepted the violation of Rule No 23 and agreed to reduce the cost of tender documents from Rs 500,000 to Rs 5,000.
-- Transparency International Pakistan is of firm view that specifying procurement only from one country is violation of PPRA Rules which requires specification to allow widest possible competition and shall not favour any single contractor or supplier nor put others at a disadvantage. Public Procurement Regulatory Authority had informed the Managing Director of Pakistan Railways Carriage Factory, Islamabad, on May 5 that a tender notice cannot be country-specific. Pakistan Railways shall note the spirit of open competition which is described in Rule No 2(f).
-- Transparency International Pakistan has drawn the attention to note that according to Rule No 50 any unauthorised breach of these rules shall amount to mis-procurement. In case the procurement is financed under an obligation or commitment of the federal government arising out of an international treaty or an agreement with a state or states or donors, then the donor's procurement conditions will over rule PPRA Rules.